Television station Channel 2 receives $200,000 from Harry's Auto Parts,Inc.,to air Harry's commercials during a local automotive repair talk show in December 2016.December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team.Shortly thereafter,Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment.The station continues to air the commercials and keeps the $200,000.Harry initiates a legal suit to recover the $125,000.Which of the following dictate that the $200,000 be included in Channel 2's 2016 gross income?
I.Capital Recovery Concept.
II.Claim of Right Doctrine.

Question

Television station Channel 2 receives $200,000 from Harry's Auto Parts,Inc.,to air Harry's commercials during a local automotive repair talk show in December 2016.December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team.Shortly thereafter,Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment.The station continues to air the commercials and keeps the $200,000.Harry initiates a legal suit to recover the $125,000.Which of the following dictate that the $200,000 be included in Channel 2's 2016 gross income?
I.Capital Recovery Concept.
II.Claim of Right Doctrine.
​

Quizplus · Accepted Answer

The Claim of Right Doctrine dictates that income received is taxable in the year it is received, even if there is a dispute over the right to keep it.

Television Station Channel 2 Receives $200,000 from Harry's Auto Parts,Inc